Freddie Mac Loans for Resident-Owned Manufactured Housing Communities

Resident-owned Manufactured Housing Community Loans Insured by Freddie Mac

While manufactured housing communities (MHC) are undoubtedly an essential source of affordable housing, resident-owned manufactured housing communities ― sometimes known as manufactured housing cooperatives ― offer a little extra to residents on a budget, which is a stake of ownership in their residence. Freddie Mac’s commitment to helping resident-owned MHC’s thrive led to the creation of the Manufactured Housing Resident Owned Community (MHROC) Loans. Freddie Mac’s MHROC loan boasts generous terms like flexible five- to 30-year fixed-rate loan terms, allowable loan-to-value (LTV) ratios of up to 70%, and amortizations of up to 30 years.

Manufactured housing resident-owned community loans can be used for acquisitions/conversions and seasoned refinancing transactions. They also allow supplemental financing and are nonrecourse. Overall, Freddie Mac’s manufactured housing resident-owned community loan is a flexible product that can meet the financing needs of most manufactured housing communities.

Why Use the Freddie Mac Manufactured Housing Resident Owned Community Loan

Designed specifically for manufactured housing resident-owned communities, the MHROC loan from Freddie Mac helps create more affordable housing options for populations they feel have historically been underserved. This is especially the case in rural and nonmetro areas where there is a higher concentration of manufactured housing communities. Apart from the typical acquisition, investors can utilize this loan for a rental based MHC that is being converted into a manufactured housing resident-owned community. Refinancing is a little more restricted, as eligibility hinges on a majority amount of the shares having already been sold to resident shareholders.

Freddie Mac Manufactured Housing Resident Owned Community Loan Sample Terms

Minimum UBP Amount: $500,000

Terms: 5- to 30-year terms; fixed-rate loans only

Amortization: Up to 30 years

Maximum LTV/Minimum debt service coverage ratio (DSCR):

  • Market-rate Rental:

    • Acquisition/Conversion: 70%/1.40x
    • Seasoned Refinance: 70%/1.40x
  • As Cooperative:

    • Acquisition/Conversion: N/A/1.15x
    • Seasoned Refinance: N/A/1.10x

Prepayment Options: Yield maintenance until securitization, two-year lock-out period following securitization, defeasance allowed after securitization; yield maintenance for securitized loans is permitted for an additional fee; no pre-payment premiums are required in the last 90 days of the loan

Recourse: Most loans are non-recourse with standard “bad boy” carve-outs

Eligible Borrowers:

  • The borrower must be a cooperative or association in which owning shares allows shareholders to occupy a certain pad site
  • At rate lock, 100% of pads must be owned by the borrower as a cooperative or association, and resident shareholders must own at least 90% of shares

Eligible Properties: Existing, professionally managed MHCs (age restrictions allowed)

Transaction Types:

  • Acquisition/Conversions: These are designed for MHC properties in the process of transitioning from a rental property to a resident-owned manufactured housing community
  • Seasoned Refinance: This is a refinance on a resident-owned manufactured housing community, typically after the majority of the shares have already been sold

Sellers/Servicers: Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but in general, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities

Supplemental Financing: Available

Refinancing Test: Required for all refinancing loans

Advantages:

  • Very competitive interest rates
  • Loans are nonrecourse
  • Standard rate locks available

Disadvantages:

  • Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
  • Application fees required: $2,000 or 0.1% of the loan amount, whichever is larger
  • Replacement reserves required ($50/pad site per year or $250/rented manufactured home per year if owned by the borrower and included in the loan's collateral)

Things to Consider With the Freddie Mac MHROC Loan

  • Private facilities, such as wells and septic systems, are allowed with considerations
  • Rental leases must not contain options to purchase pad sites or borrower-owned manufactured homes
  • Retail sales or financing by a borrowing entity of any manufactured homes (or shares) in the MHROC Borrower is not permitted
  • RV campgrounds and broken condominiums are ineligible for the program
  • Wrap financing, seller financing, mezzanine financing, and preferred equity are not allowed
  • Freddie Mac will not purchase end loans or loans to individual shareholders